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Freakonomics Radio

How much TV money does March Madness make?

Marketplace Contributor Mar 21, 2013
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According to new research, TV ad revenue for the N.C.A.A. men’s college basketball tournament exceeded $1 billion last year — topping the total revenue for the NFL postseason. (The data, from Kantar Media, found that for the post-season, pro football made $976 million in ad spending revenue in 2012; the NBA playoffs made $536 million; Major League Baseball’s playoffs and World Series pulled in $354 million; and the NHL Stanley Cup playoffs collected $101 million.)

Those numbers are closely correlated to viewers.

Last year, March Madness earned its highest TV ratings in 18 years. The last Super Bowl was the third most-watched event in TV history, behind the previous two Super Bowls.

So how are broadcasters working to turn those millions of viewers into millions more in profits? March Madness and the Super Bowl actually offer a study in the economics of broadcasting rights.

CBS Sports and Turner have an exclusive deal for March Madness over 14 years. The Super Bowl alternates each year between three broadcasters. Those two deals offer different advantages and disadvantages to the TV networks.

Another way to re-think ad revenue would be to auction off ad spots (especially for something like this year’s Super Bowl, which sold out early).  

“I would charge a huge fee to even submit an ad for consideration for the Super Bowl,” said Jeff Ely, a professor of economics at Northwestern University. And he said a strategy like that would take advantage of the fact that some potential advertisers submit racy ads, which get rejected by broadcasters, a decision they use to generate publicity.

“Everyone who is accepted would have that fee reimbursed and then charged just the advertising rate of having their advertisement aired,” explained Ely. “And everyone who was rejected would not get their fee reimbursed. And, effectively, what I would be doing would be charging for the right to have your advertisement rejected.”

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